Great questions.

The vast majority of our travel is domestic, and really among just a few destinations (e.g. SEA, NYC, PDX, SJC, SFO, a few others). The exception would be 1-2 vacations a year that might take us international or to a different destination. Our mileage per year hasn't been very high (not enough to reach elite levels), but it will probably be a bit higher once we move. A little hard to predict. Still, not huge -- I don't want to have to rely on achieving Gold/MVP/whatever to get any value, because even if I reach it in some years, I probably won't in others.

I don't care about free checked baggage. We almost never fly full fare coach, but I really like having upgrades (whether it be paid or miles) available -- that's one of the things I like about Virgin America, but they just don't fly to enough destinations. An airline that doesn't even have First (e.g. Southwest) is out (though Southwest is out for other reasons anyway).

My ideal situation would be an airline where I can actually get First via upgrades on a somewhat regular basis -- I'd take that over award tickets any day of the week. Theoretical upgrades that are never actually available are, of course, worthless.